How the instalment is worked out
An equated monthly instalment keeps the payment fixed for the whole tenure. Early payments are mostly interest, and the share going to principal grows every month. The formula uses the monthly rate, the number of months and the principal, which is exactly what this calculator applies, so the figure matches what a bank quotes for a reducing balance loan.
Three things that change the number
- Tenure. Stretching a loan lowers the monthly payment but raises total interest, often sharply.
- Rate. One percentage point on a long loan can be worth several monthly payments.
- Prepayment. Paying extra early cuts the balance that interest is charged on for the rest of the term.
Before you sign
Ask the lender whether the rate is fixed or floating, what the processing fee is, whether insurance is bundled in, and what the prepayment penalty looks like. Those costs sit outside the instalment and can change the real price of the loan.
Frequently asked questions
Does this work for home, car and personal loans?
Yes. Any reducing balance loan with a fixed instalment uses the same maths, so enter the amount, rate and tenure for the loan you are comparing.
Which currency does it use?
None in particular. The tool is currency neutral, so the result is in whatever currency you entered the loan amount in.
Why is my bank's figure slightly different?
Lenders add processing fees, insurance or a different day count convention, and some round the instalment up. The core repayment maths is the same.